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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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03:00:00

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Virtual Ch. 58 (CNBC)

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480

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Us 33, China 25, America 16, Darden 10, U.s. 9, Washington 8, Bob 8, Subaru 7, Simon 6, Geico 6, United States 6, Oracle 5, Jpmorgan 5, Brian Moynihan 5, Europe 5, India 4, Ho 4, Indiana 4, Carl 4, Bowles 4,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    December 4, 2012
    9:00 - 12:00pm EST  

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thanks to governor rick perry. we can't talk about who is going to run in 2016. you might be there as a possibility? >> i have a legislative session in front of me in a state that's going to continue to lead the country. 2016 is a long time away. >> you have possibly -- he's not a texan but he has friends there, jeb, and then you have christie. and then could be bush versus clinton again. >> governor, thank you very much. appreciate your time. >> honor to be with you. >> right now it's time for "squawk on the street." ♪ >> good tuesday morning. welcome to "squawk on the street." i'm melissa lee with carl quintanilla, jim cramer and david faber. we're live from post 9 at the new york stock exchange. a vacuum here in terms of u.s. economic data. none on top today. we're looking at a flat open across the board. as for europe, movement there.
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the buyback of greek debt will in fact work. we're seeing just fractions of a percent in terms of changes there. our road map this morning starts with the latest in the fiscal cliff negotiations. the white house promptly rebuffs the gop counterproposal which calls for $800 billion in new tax revenue but without tax rate increases for the wealthy. could this tax issue deadlock the talks? bank of america ceo warns the cliff must get stalled or the economy could be stifled well into 2014. even more dividends pushed into 2012. coach, american eagle moving up and oracle will play out three-quarters of dividends this year. more strength in housing this morning. toll brothers earnings top expectations. we'll begin with the fiscal cliff. governors are set to meet today with the president and congressional leaders. governors are concerned about the impact of deficit reduction measures on their state budgebu.
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the latest gop offer would overhaul the tax code, raise $800 billion in new revenue but seek $600 billion in health savings, net savings add up to about $2.2 trillion over ten years. boehner called the white house's original offer la la land and it does appear that even though at one point bowles endorsed a blueprint like this, he's trying to distance himself from it right now. >> the president got re-elected. he's claiming he got re-elected in part because he wants to tax that 2%. he cannot go back on that. in the meantime, congress most of the republicans signed the grover norquist pledge which says you cannot tax that 2% more than anybody else. you can't increase the taxes. so we're at a stalemate and someone has to give and i don't see anyone giving right now.
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>> bank of america today commented on the let's jump crowd. the bungee jump crowd for which they think is a scenario. >> you wonder how much of that is in negotiating position. embraced early on by senator schumer, new york state's senior senator. we'll see. you know, there are those who believe if you want deficit reduction and are serious about it, we have one way to get there and it's called the fiscal cliff and will send us into recession but we may get deficit reduction but others believe we won't get spending cuts that we need. more will take place in defense which many argue does need to happen perhaps though not in the same way it does. we shall see. what's today's date? the fourth now. we're not too far. people say the 18th. we need to at least see something for the 21st. >> they're going on vacation
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with legislation. is that right? should they be able to take off? >> we should sequester their vacation. >> a great tweet this morning, jim. if you had a big project due at work, would you be going on vacation a week from tomorrow? >> let's say our bosses said we need you to finish this by year end. pal, man, i got a trip to st. bartz. what would they say? they would say stay down there. i don't like one of the defensive line guys that gets fired by the eagles. does he get to fly back from texas? we would fire these guys where they are, when they are on vacation. no. they get to take vacation without finishing their project. >> a couple good poll numbers out today. abc/"the washington post" if we went off people would blame gop by two to one margin and then the pew poll. 49% do not believe a deal will be reached. 40% say a deal will be reached. >> i just know that if you're a
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republican, there's a primary. if you are going to run in that primary going forward, you'll have no problem provided you pledge to norquist not to raise taxes and you don't. these guys don't worry about primaries. they don't care about what the republicans -- they don't even think themselves as republicans. they think of themselves as anti-tax people. and they feel they pledged to their constituents that they're won't be any tax. that's all they care about. >> they're $800 billion plus into a deal. >> i guess the gap has been -- >> right. it's been narrowed. >> every offer is something. >> both of the offers were exactly what both sides promised during the campaign. they're still not willing to get off the stump. i think they believe we're no closer than where we were last year. >> didn't it take your breath away that the democrats had rejected it? i'm looking -- i stepped away to
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get a diet coke. my last soda that i'm ever going to have. >> as of yesterday? >> swore off soda. while i went to get my diet coke, i came back and democrats had rejected a proposal that they hadn't even read it yet and they rejected it. that's why i said that's the last time i'm getting a soda. >> it does not meet the test of balance. you don't think they gave it a test. >> it is about revenues. it's about loopholes closing. >> it's an impure thought. don't be seduced by the democrats. grover norquist, don't have impure thoughts. didn't jimmy carter once talk about lust? if it ever got to your brain, you're going to lose the primary. just pointing that out. >> the head of a banking giant has said about the fiscal cliff
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in an exclusive interview telling becky quick that the impact of the fiscal cliff is already being felt in business planning for next year and 2014. >> even leading up to that, people becoming more conservative. that's had an impact on what the growth will be in '13 all things being equal and we're in danger if this strings out into '13 that you could have problems of what '14 would look like. >> by 2013 if negotiations get strung out, it will impact decision making and whether or not to build a plant or hire people or expand a division or not. >> which we have heard time and again from many of the leaders and many corporations whether they be financial or otherwise. it comes back to this world. certainty. lack of it. and we don't have a lot of certainty at this point. they still have to do business. not as though they won't come in on january 1st and go to work. they are.
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>> i was thinking, david, could there possibly be any m&a between now and year end? no. >> maybe a little. >> there will be some. you're less likely to make the big move. less likely to make the big move for a variety of reasons. one of them being you don't know how you're going to be taxed and how you're going to be fully regulated. you want to know the future. >> we're seeing our calculators on the web in which you can plug in your income and based on various scenarios do we go off or not go off and how will it affect you. it's seeping into mainstream culture. >> i like that. >> accelerate dividend. >> look, i want to pay lower taxes. i'm going to move into the 52% bracket, which is a lot. that means that i have to go to labor day before i start making
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money myself. i'm not in favor of that. cramer loves higher taxes. i'm not into higher taxes. it's obvious that the president is going to stick by this position because he thpgs inks was elected for it and moynihan, i found his comments chilling. pnc thinks that they are saying they don't think we'll go over the cliff. as between pnc and bank of america, i think bank of america has a better handle on things. >> the cliff continuing to affect companies dividend strategies. we have coach, dsw this morning, and now american eagle moving dividend payable dates to this year after oracle announced it will accelerate its fiscal '13 dividend payments into this month. the payout for larry ellison will exceed 1$198 million. when you consider potential tax rates difference, that's serious money. >> real money there where you go up as high as 41%, yeah.
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from where we are right now, absolutely. the most tax efficient way to deal with dividends is not to have them at all. and actually run real growth companies that don't return anything to shareholders and power everything back into your business. >> a lot of companies have more cash than they need. >> i'm just saying. >> you're a purist. warren buffett wants you to hold your stock. last night on "fast" saying most individuals we deal with do not have taxable accounts. so what. he says that, listen, we're making far too much of this. jim, directly against me on this. it's very important issue that dividends will be highly taxed. that's a deal breaker not to have it. that's another tim geithner here's the way it has to be go over the cliff or else stance. >> so last night on "mad" you did have a shopping list of sorts if in fact the smoke
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clears. amazon, visa, mastercard, sherwin williams. >> look at toll brothers today. holy cow. you have to paint a loss of houses. household formation coming back. amazon is just a winner here particularly in sandy. i regard google as making a comeback. i think that when you look at what -- apple fears google. google is going to do better going forward. look at facebook by the way. they figured out things. i'm not going to be -- i'm looking at stocks that once we go over the cliff bounce back and if we don't go over the cliff are where a lot of money is going. >> where does ulta, are these tier 2 names? >> ulta is -- david and i joke about this. it's the growth stock -- key to this market. gilliad has been great. same with ulta. you may laugh at ulta.
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i won't finish my sentence. >> i may. >> this double the store thing is what whole foods says. any time you can double stores, growth guys just love it. >> we're told there's no concern if we go over the fiscal cliff that that will result in some sort of a chill in the housing recovery offer the housing market. this harvard study that bob toll cited, 1.8 to 2.8 million households fewer since 2007 were formed and that's playing catchup. we should have the formation of those households unrolling now. >> i thought it was amazing. saying the optimism has to do with demographics and not the fiscal cliff. kimberly clarke talkeded abo ee decline in birth rates. i don't shop for diapers.
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>> i did. not long ago. >> are you out of it? >> tail end. >> such a nice thing. >> amazing statement by them saying, listen, not a lot of people are having kids. >> what about adult diapers? >> there is some household formation in the u.k. we'll get at least one new baby in the u.k. right? >> she's a smart person. i wasn't going sexist there. i know better than that. i'm not going over the sex cliff. >> she's fashionable. >> yes, she is. >> even i know she's fashionable. >> whatever she wears maternity wear, it will be a boost. >> does she go to gsw? i said that was discount. it's designer. and you've got to go there. >> there's one on 79th street. >> gorgeous store. you can go to whole foods and you can buy shoes. may i suggest you do this on
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saturday? just be part of american culture. >> what do you think the chances are that i would ever do that? >> don't you shop for holidays even? >> no. >> online? >> no. >> who buys presents for your children? >> my wife. >> are you an american? >> yes. >> why aren't you shopping? i question your patriotism. >> i bought enough stuff from china and thrown it away already. >> right now for valentine's day shopping we have to solve that long beach strike. >> clerical workers. >> you can't get things i want to start shopping for for valentine's day the moment christmas and hanukkah is over. you have to start shopping for the next day. that will be constrained because of the port strike. when we come back, house majority whip kevin mccarthy did sign this offer from the gop. can he convince the white house to back the republican solution to the fiscal cliff? one more look at futures on a
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tuesday morning as melissa said. not a lot of data today. just wait until the next three days. it all starts with adp, jobs coming up later this week. more "squawk on the street" back in a minute. bob, these projections... they're... optimistic. productivity up, costs down, time to market reduced... those are good things. upstairs, they will see fantasy. not fantasy... logistics. ups came in, analyzed our supply chain, inventory systems... ups?
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ups. not fantasy? who would have thought? i did. we did, bob. we did. got it.
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shares of toll brothers are rising beating estimates helped by a jump in signed contracts and a drop in cancellation rates. every metric in this report came out gangbusters and the ceo cited this upswing in momentum that began in the first quarter of this year. they say next signed contracts increased quarter by quarter. 45%, 51%, 66% and 75%. now that's a case for momentum sustained here. >> the question is auto. obviously tremendous demand. home tremendous demand. can these do well even if we go over the cliff. momentum here was so amazing. we all know if they go over the cliff, payroll tax, you'll see less in your check. this toll brothers, you buy $500,000 houses. people are buying them like they haven't in five years, six years. >> a comment on five weeks into their first quarter, net signed contracts up 34%.
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for the previous quarter, a quarter over quarter, up 60%. at some point these numbers are going to flatten out, right? >> yes. we had a tremendous contraction in this industry. we were building as many homes as we were building in 1950, 1960. i'm impressed by this quarter. i know bob toll was bearish when it was right to be bearish and he's bullish. i don't think he'll pull it in just because of what could happen january 3rd when they return. >> we do have twists going on that's supposed to end. that being the long end coming down. 30-year mortgage is down. i think maybe 20% in rates since april or something like that. >> incredible. the fed chief was pointed out in this tremendous press release. this is a very powerful story. >> they talked about financial strength giving them the ability to buy land. they are building and acquiring land in this low interest rate environment which bodes well for this upswing in momentum. the question as you mentioned at
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what point do comparisons get so tough. first quarter 2012 was first quarter where they started to see the upswing. 45% increase in signed contracts. we're lapping that now. can we beat increases as we move on? >> it could be tough. to the extent that we're building, any momentum at the bottom here, we're still building off a small base as you know. so you could have significant growth for some time. >> everything that goes into a house. a lot of spending goes into a house. >> definitely. cramer has stocks on his list that are worthy of your attention. what does he think about them? his mad dash is coming up next. later, shares of gamestop surging from summer lows hoping to score big this holiday season. we'll talk with the ceo. let's take another look at futures as we head into this tuesday morning session. we're looking about flat. more "squawk on the street" straight ahead. this is america.
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about seven minutes until the bell on this tuesday. let's get cramer's mad dash. people trying to figure out what darden was saying in this release. >> i don't get it. i got to tell you, this is one that's been void by the divid d dividend. a series of disappointment and it creeps right back up. i don't know when that stops. when did people say red lobster and olive garden aren't doing that well. i don't know -- it will probably happen again. there will be guys coming tomorrow to buy darden because
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red lobster, olive garden, maybe things will get better. i am questioning whether there isn't something structurally wrong that these don't do well. >> their discounting did not resonate with stretched consumers. >> it's not resonated when things are good. maybe just not resonating. the difficult is that my olive garden jams constantly. this is one of those problems where you say -- when i go it's crowded. how can i not buy an airline. i can't get a ticket. i would say buy it tomorrow. that's what's been happening over and over again. >> starbucks? >> big meeting coming up. howard schultz doing starbucks day. they also like dunken. coffee stocks have held well. starbucks will be a tea story too and also they are going to make breakout with india. >> more news today regarding yum
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and mcdonald's and discounted whoppers. >> this restaurant group has been awful. the only one that has risen up to use the rise above theory is panera. i think panera offers a better value. this is all about value. who offers the best value for the price and people think that panera does. panera is exciting. it has a costco feel to it. you never know what will be on the menu. i like the $4.17 chicken caesar which comes in low in terms of calories. very few calories. >> you don't need to wore kry at that. trust me. >> dr. lewis said i'm way too fat. >> he needs his eyes examined. economic news out of china is getting better. ceo of dow chemical has seen signs of a pickup. is the worst over? we'll talk to jpmorgan's chief equity strategist and what a year no home builders. can they rally after toll results? we'll follow many sectors when the opening bell rings in about
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financial capital of the world. we're counting down the opening bell on a tuesday morning. we should note the move in the commodities market this morning. look at gold for instance. breaking 1,700 at one point. one-month lows breaking near term support of 1700. oil also down a buck on wti more than at this point. >> we do have that euro that's been hanging in. some people think it's because of the euro. other people feel that everything goes down in a fiscal cliff situation. i mean, commodities are saying we're going to go over the cliff. that's what i think. >> it's interesting. there are these recent reports tallying how many american eagle gold coins americans are buying. is that the ultimate safe haven trade. if americans are buying gold coins in record numbers, the strongest sales since 1998, and it's not just seasonality here. it's interesting. >> i own some.
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i own silver. >> silver and gold. >> you can buy silver and gold. you can actually -- there's a big markup in coins. the government doesn't help. you can own pieces of silver and pieces of gold. >> do you have some on you right now? >> no, i don't. i have it buried in the backyard. i have it in a vault. never bury your gold in the backyard. >> i'll remember that. thank you for that advice. >> first we have to get backyard. >> el paso electric company celebrating tenth anniversary. yit celebrating its 100th anniversary. want to go straight to mary thompson with breaking news out of fdic. >> this is the fdic's third quarter breaking profile looking at how banks performed in the third quarter. profits for insured institutions rising to best levels in six years in the third quarter. higher profits driven by higher
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revenue and lower loan loss provisions. the company's third quarter operating revenue increased by 3% in the last quarter and that's a positive sign. it was the first time for the world's largest revenue that banks posted in three years. loan balances increased. it was slightly less than in the second quarter. we should also note a lot of that revenue increase was driven by asset sales at banks. lastly, the fdic pointing out a couple risks remain. while banks profiles are improving, it says risk remains specifically concerns about the fiscal situation here in the u.s. and concerns about the economic woes overseas. back to you. >> thank you very much, mary thompson. markets here are open. flat or lower across the board here. notable moves. apple for one a lagger in today's session down by almost a percent as markets overall are flat. still having trouble here.
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>> positive comments in china with initial sales being very strong. apple is a barometer of how the day goes. >> in terms of pc space, dell continues gains up by 1.2%. hewlett packard also gaining traction. some might argue that hewlett packard lows were a win at the disclosure of the autonomy alleged fraud occurred because we've been on an upswing. >> it may have become oversold. i also think and i talked a bit about this yesterday. the company would say it's committed. we heard from meg whitman many times keeping itself together. that story, that article last week from bill george, man who used to run medtronic and idea of breaking this company apart, i would argue at least you're going to hear more about that. that may be at least one reason why if you look at the stock and argue it's cheap, you think perhaps down the road that could be a catalyst to unlocking value. who knows if it ever actually
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happens. >> that piece on dell was brilliant. >> you liked that, didn't you? >> he hated it all of the way down. he does not believe in value of hardware. does pull a couple quotes when michael dell talked and stock was higher in 2010 thought this should be a leveraged buyout. cash on balance sheet. some of it overseas. this was a much more thoughtful piece than the headline and he's an old hand. i don't think it's idle. i think this piece was not idle. thoughtful. >> they initiated december 2010 and rode it down 31%. >> s&p up 14% during that period. that's high quality research. >> it's a good call. no doubt. >> david you initiated the concept of the penguin. this was not the march of a penguin. >> that analysis is hard to find. who knows if it would be right. you have to say you have a good call. you reversed it completely. >> and $3 in cash.
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i'm sure that he's fed up where the stock is. he's a believer that you can have more devices. i know apple feels that the ipad is the pc killer for the next generation. >> speaking of calls out of goldman, they take iac to a sell today. price target 53 to 42. i'm not sure i understand the note completely. increasing costs due to surge competition. >> search arbitrage. something i was vaguely aware of. it occurs when a company earns nor for selling the ad than it does for acquiring the traffic. it has to do with ask.com buying key words at google at a cheaper price than smaller advertisers can and then selling them and making the spread. a lot of it is earnings. they question that. they say that google and change in policy make it more difficult. isc had a good run let's not forget. the ceo there reporting in to
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dillard with a very nice period of time here in running this company creating value. >> it's been fabulous. it's worked. people are willing to pay for it. one of the few things that people are willing to pay on the web. i have not used it. i'm told great things. >> and ask was an asset that many people completely overlooked. an acquisition many years -- they rejuvenated it in part through this strategy. >> so they are questioning the earnings qualities? >> yes. they are questioning whether the risk profile has been raised significantly as a result of competition and search arbitrage and policy changes. and policy changes with regards specifically to google raising restrictions around search redirection. you go to google. type a key word and you get redirected to ask.
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will that continue to be able to happen? >> it seems like there's something wrong with that. i don't know what exactly. >> it's been great stock. a lot of cash. >> i have the report in my hands. i can't say that i've read all of it. >> i'm now getting a lot of people saying i must take you to the mall of america. people want me to take you. >> what are we going to do? test for pesticides? >> people think that deal will break down. >> let's keep an eye on the starbucks analyst meeting. it is in manhattan saying are you buying these guys still? are you buying these guys still? yeah. sales lately have hedge funds taking tea and sending it to labs. >> that's a great story. >> i read about that. i thought they resolved that. >> they haven't resolved it. we're on it. >> that's great story. why do you bury the lead like
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that. >> because it has to do with very specific things and a merger clause and merger agreement and requires a lot of reporting of which sometimes you need to do more. >> i just wanted to take you to one. i didn't know it would be -- >> sorry. i know. i couldn't help myself. >> let's check in with pisani with more on what's moving this morning. >> happy tuesday. the fiscal cliff still being talked about here. there's a certain realization that the rough outlines of a deal are already available here. modest tax raises, some spending cuts, that's the real rub there. extent of spending cuts. the bad news if you want to look at it this way and i said it several times in the last few days, the era of american austerity is about to begin. we have seen some of it going on in parts of europe. it's about to begin here. my sense is that it will be gentle austerity in 2013 and into 2014. at least in the very beginning part of this thing. other good news, housing numbers and autos have been good
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recently. you saw toll brothers yesterday. gm did not bad although the trucking was light. the fed, they're going to continue to expand their qe program likely at the meeting on december 12th. depends on whether that's good or bad news to you. that will provide some cushion against austerity. so a mixed realization about where all of this is going. one of the reasons the markets are holding up well. the toll numbers. i want to emphasize, 70% increase in orders. do you know what that is like? that's like phenomenal. most of these companies are having great years. they're reporting 20% to 30% increases in orders. toll is the top of the heap. luxury home builder. 70% increase in orders. gross margins increased dramatically. 20% gross margins. bottom line is they're doing great. here's the problem. it's really expensive. the stock is a fortune. it's like 30 times forward earnings. that's a lot. most of the other companies competitors are in the 20s in terms of their numbers and even that's expensive.
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this is going to be a problem. has been for home builders for a while. let's talk about knight capital. i want to get your thoughts on this. offers appear to be heating up a little bit. there are reports that another company is coming in here. this is an expensive offer. offering all cash but we don't know how much. that's the problem. we don't know if it's $3 or more. they'll have to come up with a billion dollars for the company. 500 million for the overall numbers in terms of the cost of the company. we're talking about $1.5 billion. i don't know where this is going. my guess is there's a competing offer and getgo will sit tight and wait for a real offer to come in offering more than $3 a share. i don't know what you think. >> it has to do with where the cash is coming from as you say, bob. silver lake, one of the backers, the private equity firm silver lake, do they want to double down and how much do they want
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to and now reports that they are being approached to provide more cash because that's key as you say versus a very complicated two-step offer from getgo that they claim is worth $3.50 a share in value. >> that's the problem. we don't know what that combined entity is worth because getgo does not make public its information. we don't know what its financials are right. it's hard to value that end of the company. >> tough call. thank you. let's check out latest news in energy and metals. sharon epperson at the nimax. >> i'm in the gold pit. gold below $1,700 an ounce. steep selling we see today in gold is reminiscent of what happened just a week ago. heavy volume. a lot of selling. last week the story was we saw a lot of put option activity. a lot of puts at the strike price around 1,700, and where are prices today? right in that range. it seems unusual that we're looking at exactly what was actually forecast by some of the put option activity we saw a week ago. we're watching the prices fall.
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some traders say it's a liquidation of many global macro funds who now before the end of the year want to take their profits here in the gold market and not only in gold, yes, gold is at a one-month low but we're looking at a sell-off in the natural market and natural gas looking at seasonal demand figure, storage levels with weaker prices across the board in commodities. >> sharon epperson, thanks for that. coming up next, a live interview with house majority whip kevin mccarthy. hear the message on the fiscal cliff he plans to send when he meets with governors today and small business leaders tomorrow. stay tuned.
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house republican leaders making a counteroffer that was rejected by the white house yesterday. the proposal calls for $800 billion in increased tax revenue over the next decade which is half of what the president proposed in his plan. it does not include higher tax rates for the wealthy which is the central issue dividing the parties. we're joined by majority whip kevin mccarthy joining us from the hill. good to have you.
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good morning. >> thanks for having me. >> a lot has been made over whether or not you're trying to sell this as a bowles endorsed plan. are you? >> we're not trying to sell bowles but he talked about this frame work before the supercommittee. 800 in revenue. 1.4 in spending cuts when you go for mandatory cuts and then discretionary cuts. we make that frame work. that just so happens to be the framework the president talked about when campaigning. he's changed the goal post of where he wants to go with the geithner plan. we want to make sure we don't go over the fiscal cliff and find spending cuts to control the growth of government to save what we need to do. >> you mention bowles changing his tune. he does say in his words circumstances have changed. it's up to negotiators to figure out where the middle ground is today. do you think that middle ground moved in any direction as a result of the election? >> well, i think one thing you
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have to see is you have status quote. president won re-election. republicans kept the majority in the house. i think you saw where the republicans went right after the election. you had the speaker say you asked for revenue. here's revenue. if the president asked for 800 billion in revenue, we're providing it in a way that we believe is a better growth to protect small business. at the same time the president said it has to be a balanced approach. two for one. if you watch for geithner proposed, new stimulus program and others, the spending increases. you won't go after spending cuts of what we've been trying to get to. >> congressman, jim cramer here. i worry that what you're talking about is so wide ranging that it makes me feel like you don't have enough time to do it. you're going on vacation. why should you be able to take a vacation without legislation? >> we should stay here and be in the room. when we first made the proposal after the election, the
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president took three weeks to respond. we responded right back because we don't believe we should. we want to be in the room. let's get this done. you watch the speaker every day trying to make that happen. we're meeting with governors today. we're meeting with small business tomorrow. we're willing to sit here. let's get this done. there's no reason to go over the fiscal cliff and no reason to play games. the geithner proposal is asking this place to go where the democrats wouldn't even go. the president in essence gave his budget proposal that hasn't even got one vote from either side. we want to be serious. the president asked for 800 billion in revenue. we offered it. the president said it had to be balanced. we go after the spending cuts. this is something that bowles said before the supercommittee. we are trying to be reasonable and smart on this approach. that's why we don't want to waste time. we don't want to go on vacation. we want to sit here and work and get the job done. >> why no mention of the debt limit per se and whether or not congress has authority over that? is that just too messy to deal with right now? >> when you start adding
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everything else in, that just makes it impossible to get to. we want to see a frame work where we take a bite of the apple right now and have overall tax reform next year to unshackle what holds this country back and lets get out of this mess. >> ken conrad said everyone should get on helicopters and go to camp david. is that a reasonable suggestion? can you envision leadership getting together with the white house and actually going to camp david? >> you know, we don't have to go to camp david. we'll go to the white house or he can come here. you don't have to do some elaborate scene. we don't have to make a television production out of this. let's get in a room and solve it. you don't have to send geithner down in the process. it doesn't take a lot. he laid out a framework of a balanced approach. 800 in revenue. twice as much in spending cuts. we responded rapidly. we didn't wait three weeks. we want to solve the problem. we can get this done. >> there's been a lot of discussion today about what's
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termed the let's jump crowd thinking going over the cliff is the best medicine the country can take. is that destructive to this process? >> you'll find that on both sides of the aisle. if the president keeps changing the goal post, maybe that's the process he wants to go. that's not productive. the american public is not looking for that. they are looking for people to come together. there are so many challenges that face us in the next year, we have to learn to crawl and to walk and to run. we have to get together and find the compromise and move the country forward and that's exactly what we did with our proposal. why now when the proposal goes forward if this is something you've been asking for in the frame work and structure of what you said, why now is that unacceptable? you can't move the goal post in the middle of the discussion. >> you talk about moving goal posts but one thing the president is consistent on before and after the election is taxes need to go up. that's something that you simply will not allow for, correct?
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>> the president says he needs more revenue. we offered more revenue in a way that could protect small business. in the president's proposal, he's going after from inheritance tax, from dividend tax, that's going to hurt individuals. we're finding how do you enhance growth but at the same time protect small business. that's revenue. we put revenue on the table. that's a fundamental difference than you heard from republicans eight months ago. this is a compromise and a place where the president should be able to get but at the same time the president has offered nothing in spending cuts when he said he wanted a balanced approach and at least 2.5% to 3%. he has to be serious. he offered more spending and stimulus than offering any new cuts. >> there have been some polls and i'm sure people can point to others that say different. the latest one out of abc/"the washington post" is that americans if we did go over the cliff would blame the gop more
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than they do the white house. how do you respond to that? >> you know what? you shouldn't play politics with this. i think people should come before politics. if you watch the nature of what republicans have done here, we've talked about this and passed legislation last year from southwe sequestration making sure we don't go over the cliff. we want to make sure we solve this problem and don't go over the cliff. >> as someone who signed this offer, who was one of the signatories of this offer, is this a best and final or not? >> look, we responded to where the president was and we didn't take three weeks to do it. we want to solve the problem and get into the room and i don't think this has to be letter to letter. let's sit down the room and work out our differences. first and foremost, the president should show where he's talking about a balanced approach and show us where the spending cuts are. i think we've come and said here's the revenue.
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let's talk of where spending cuts. >> congressman, you have all of our attention. thanks for your time this morning. >> thanks for having me. >> congressman mccarthy joining us from the hill. we'll unveil the winner of company of the year later this morning. first -- ♪ >> coming up, we've got a six and we've got a 60. put them together and you get jim cramer six stocks in 60 seconds. it will make sense when "squawk on the street" returns.
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simon hobbs telling us what's coming up at 10:00. >> what is darden saying today? should you sell cruise line stocks on what we know now? we'll talk about that in the next hour of the program. should you buy commodities on the basis that china is turning around? we'll have jpmorgan's chief asian strategist and you know the conversation about dollar/yen. it could mean jobs in indiana.
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the head of subaru will join us. >> let's get six in 60. let's start with bernstein and yahoo!. >> this has been a good stock. it stays that way. >> skyworks? >> one of the most controversial because this stock -- that's the wrong price. okay. dollar tree. we have morgan stanley saying things are better. and oh boy. skyworks. a real dog. >> ubs on lulu? >> lulu reports this week. pattern is they report, short sellers send it down at the open and you buy. i pledge to have commentary before the opening when this reports. >> bernstein says buy corning. we know they said good things. >> i was surprised at that stock. you know, that's wrong. it's a good company. >> rbs on striker.
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>> this is the second guy this week who said they'll offer a special dividend. that would be still a good thing. >> what's up tonight? >> i have citi national. this is a boutique bank based in california making money for people. i have to find out. they have big business with the ports in california. they also are worried about the fiscal cliff. i have known russell for years. >> we'll see you tonight. >> thank you. >> 6:00 and 11:00 eastern time. the president meeting with governor this is morning about the fiscal cliff. two former governors will offer their perspective. plus, more on what bank of america's brian moynihan told becky this morning. more "squawk on the street" in just a moment.
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but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know. welcome back to "squawk on the street" for a tuesday. let's get at road map for the next hour. brian moynihan warning the cliff must get resolved or the trouble
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could extend into 2014. >> garden saying promotions didn't resonate well with increase in competition forcing them to cut guidance for the full year. is this part of a broader trend for the restaurant industry? another dose of strength in housing. toll brothers this time with the quarter. earnings topping the street as revenue did rise across all regions. we're going to tell what you it means for the sector as a whole. >> after a slew of stronger than expect ted data out of china, jpmorgan's strategist is here to weigh in. becky quick sitting down with brian moynihan. among the topics they discussed the looming fiscal cliff and business concerns heading into the end of the year. becky joins us with more from this interview. >> bank of america has a huge number of small businesses as clients and that's where moynihan says this uncertainty coming out of washington will have the biggest impact. he wants to see not just a solution to the fiscal cliff but a deal that addresses problems that go well beyond the january
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1st deadline for the sequester. >> i think that if this doesn't move forward with a solution to actually start to lay out ground work to solve long-term issues, it could be disappointing even if it is fixed. >> we have talked to ceos that say they have to go to boards and lay out plans for what they're planning on doing in january and they have to move forward with the plan that has an assumption we don't get a solution. do you hear that from your clients? >> absolutely. i think it's not january. they were forming these plans in august and september. even leading up to that people becoming more conservative. that's had an impact on the growth in '13 all things being equal and i think we're in danger if this thing strings out into '13, you could have problems of what '14 would look like. they make the budget in half a year. the decisions are should i add new equipment?
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what would final demand be? all of that is done for corporate america for '13. you are talking about what happens next and so my concerns is we need to get a solution that has near term fixeses f se lack of a better term and longer term to look at '14 and '14 being constructive and not think anything else. >> if that wasn't enough pressure to put on washington, now we say we need to worry about what it will mean for 2014. moynihan says that while business leaders are changing their behavior ahead of the f k fiscal cliff, consumers are not. one out of every two households is a customer. that's why it's great gauge of the economy. so far american consumers are still spending away and he says that you can thank at least in part an improving housing market for that. carl? >> all right. thank you very much, becky. great stuff. thank you for sticking around. >> thank you. >> sticking with the cliff, governors are set to meet with president obama and congressional leaders. the meeting coming one day after the white house rejected a republican plan for averting the
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cliff. chi chief washington correspondent john harwood is outside of the white house this morning. how do business leaders change the equation? >> reporter: the president is trying to orchestrate a consensus behind his approach to deficit reduction. this is a group part of the national governors association executive committee. a diverse group. he carried three states he represents and governors include scott walker, leader of conservative government reform movement going after public employee pensions and shrink government obligations that way. governors are pragmatic. the president is trying to make the case if you look at polls and revenue needs of the government and ageing of our population, the pragmatic thing to do is trim entitlements.
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the significance of speaker boehner's offer yesterday he put specifics on entitlements on the table. they are significant raising the medicare eligibility age from 65 to 67. and enacting a reduced inflation formula for social security benefits and other government programs. those are real tangible offers on entitlements that mean that even though the white house rejected the offer, carl, this is positive because now you have specifics from the white house on taxes, from the republicans on entitlements, that's the beginning of the conversation and the president is hoping the meeting with the governors helps move that along a bit. >> i thought it was really interesting there's a new beat to the country after the election defeat of romney the way in which the governors in las vegas who spoke about modernizing gop as you might do abroad. can they push the gop along to the extent that we get a deal
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sooner rather than later on this particular issue? >> reporter: in theory they could. in practice the national political dialogue and state level political dialogues move on separate tracks. the governors can lend their voices but they can't have a lot of influence. members of the house and senate who are elected in particular states, they are driven by their own electoral imperatives and political imperatives and the governors have influence but not all that much. the one thing that is true about the governors, simon, most states are strained financially. they need more money. the healthier the federal government is financially, the more aid they get in those states and the reverse is true as well. the worst the federal deficit, the more aids to states get cut. >> okay. john, thank you very much. the view there from washington as we keep our eye on fiscal cliff negotiations. we have an important profit
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warning today. shares of darden at a ten-month low after the restaurant operator cut its full year guidance. rachel rothman downgraded darden last month from positive to neutral with a $58 price target and joins us now on the cnbc newsline. thank you for joining us. i appreciate it. it's become a busy morning for you. >> thank you, simon. thank you for having us. >> what's gone wrong at darden? the ceo is saying we had promotions. they didn't resonate well. we need bolder changes at red lobster, olive garden and longhorn steakhouse. >> they spent the last couple years trying to repotool menus d change limited time offers in an effort to reengage with core customer and drive positive traffic. unfortunately the efforts that they unveiled to this point have yet to actually take hold and so they are issuing a disappointment here for the
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quarter and for the full year citing negative same store sales at their core brands. >> is that partly because of the delayed rolled out of olive garden changes or because they simply got it wrong? in october on the show we discussed taking a seafood restaurant, red lobster and putting nonseafood items on it because they were cheaper. >> i'm not sure that i would say they just got it wrong. i think i would say that they haven't figured out how to get it right yet. i don't think that it's about a delay. i think it's about them trying to figure out how to win back their core customer that is obviously choosing to go some place else at this point given the negative traffic trend. what you need to be fearful of is they highlight in the release that based on current trends and where they think their core customers wallet is, they need to focus more on value. it's pretty difficult to price discount your way to profitability and to growth. >> rachel, is it a problem with this price point that darden
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exists? who is darden losing to if the consumers are not going to olive garden or red lobster? >> i think you bring up a great point. the question should be asked are people trading up those that are doing slightly better into the realm of cheesecake factory if it were an evening occasion or even into chipotle or panera if a lunchtime occasion and people are trading down into fast food so where you are are in the mid price point which doesn't necessarily have a core customer for somebody to trade into it. i think they are getting squeezed from both sides. we think casual dining they could be losing share to competitors showing positive same store sales and that would be something like brinker which owns chilies. >> we have a bigger problem that's emerging. brian moynihan was talking about small businesses impacted by the fiscal cliff. i did an interview yesterday afternoon with someone who has done hundreds of channel checks
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and works in the same areas as you and warns me that he's seeing softness. take a listen. >> we're seeing now october, november little bit of a slowdown. it's due to post-election blues. fiscal cliff coming up. you had hurricane impact on the northeast when most of the companies report fourth quarter sometime in january i think they will probably see some sort of a modest slowdown versus that third quarter trend that we saw. >> let me take you specifically to a note out you have this morning on the cruise liners where you are talking about the trends there. the pricing there continuing to deteriorate at a time when royal caribbean is up 42% year-to-date. carnival up 19%. what do you make of that area now? should people sell? >> i guess i would say contrary to what your guest just said from bank of america, we are actually seeing weakening signs across all four sectors. we cover hospitality broadly which is gaming, hotels, cruise
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lines and the restaurants. so in each of our sectors we have either seen pace of gains slow or pace of declines steepen. we aren't seeing strong underlying macro economic trends from the consumer and even hotel demand is weakening here. i actually agree with the analyst from citi from yesterday that we are seeing weakening trends. >> just before we let you go, where is the greatest call to action in your view? where should people focus most on their investments? >> i guess if they have a very short-term horizon which i think most clients do between now and year end, we need to focus on something that had an actionable catalyst between now and year end. only two companies that we cover set to report between now and year end would be carnival in cruise space which you highlighted and darden which preannounced today. darden action took place today so the next catalyst is carnival
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and as you highlighted the setup into carnival earnings is not as good in second and third quarter because there's no sense in pricing and stocks are up over 35% year-to-date. >> it's good to have you on the show. thank you for joining us. >> a pickup in chinese economic data overnight raising hopes that a hard landing might no longer be in the books for china. is the worst finally over for the world's second largest economy? we'll talk to the chief asian and emerging market strategist for jpmorgan next. toll brothers earning topping consensus saying momentum is on the upswing. we're sorting through the numbers and what it means for the broader sector. stay tuned.
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dow chemical ceo is focused on china telling investors that he's skeptical of a big bounceback in china but he says there's a beginning of a return to buying power. is the world's second largest economy likely to regain strength in 2013? we have a chief asian and merging markets analyst from jpmorgan.
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adrian, always good to speak with you. economic data and currency markets are telling us something very different from the stock market in china. pmis for november, seven-month high there. the stock market, the shanghai composite is at levels not seen since 2009. you think it's a stock market that's getting the story right, correct? >> we've got a real contrast here between what local investors tell us with asia market hitting four-year lows and the hong kong listed stocks which have been doing reasonably well since september low points. some data improved. pmi data as you highlighted moved above 50 but it's still below 51 so hardly a resounding strength in the economy. we have had better monetary data as well. so they are arguing that as more credit is available in the economy, you will see an acceleration into next year. what we have been focusing more
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on is profitability. we've seen profits barely grow in china this year just .5 but top line sales growth has been 14%. the problem in china is too much capacity. what we think is going to happen as you look into 2013 is companies are going to cut back on cap ex. this is 40% fixed capital formation. it's possible that growth slows into 2013 as companies focus more on profits which might be good news for me as an equity investor in china but probably not good news for those that are dependent on high chinese economic growth. >> we have heard that in terms of data points that we get warning of a recent slowing in china. you say that the consumer could face more headwinds in 2013 so the multinationals that are highly leveraged to china, we could see troubles ahead for them?
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>> yes. i think there's two sides to the story. one is that they have been opening too many stores and this is across the retail and residential -- retail space. they have a nonskilled part of the workforce that's already contracting meaningfully and this means that you have tight labor markets even with low growth. wage inflation is 15%. so there's a margin squeeze there because of a lack of labor, which may sound like an odd thing to talk about in the world's most populous country but the working age population has peaked in china but more importantly there's a skill mismatch with more kids going to university meaning the supply of nongraduate labor is contracting fast. >> what most people watching you now will want to know is whether china can put a better bid on
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the commodities. do you think that's likely in 2013. >> china will control less commodities in 2013 than it did in 2012. housing starts are down 15% in china this year. it takes a while for decline in housing stocks to feed through a decline in raw material use indicating profits are weak, which the rationale response to that is cutback on cap ex. i think it's possible that china produces less steel and cement and less copper and less aluminum next year and commodity bulls get a shock by that. >> we showed a chart showi. does that mean that you are skeptical of the gains in hang seng? >> one of our problems in trying to go neutral let alone overweight china is that the big
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stocks in china are producing generally disappointing profits. so i think the right thing to do is to remain underweight and underweight a shares. there have been interesting moves in sectors like banks performing well more recently and more constructive there. our concern now on the banks is they account for over 40% of the profits of msgi china index even though there is a market cap. we worry that high level of profitability will not be allowed to continue in an environment where the industrial sector is suffering weak profits. >> thank you for your time. appreciate it. >> thank you. the world's largest video game retailer gamestop is driving to make the gift giving experience better. >> more than 100 plus special
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another sign of strength in housing. toll brothers reporting 48% year over year jump in revenue for the fourth quarter. should investors take shelter in the luxury home builder? bob, good morning. >> good morning, carl. how are you? >> good. the quarter looks so impressive and yet you look at the chart and you say i missed my chance. it's getting late here. is it too late? >> i still think there's a lot of upside in 2013. we're looking for just based on guidance of deliveries to rise by 20% next year. definitely time to get in the stock. >> what happens if -- the 30-year rate is down 20% from april. to what degree does toll suffer
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if in fact that reverses and starts going higher? >> you know what? toll has a huge percentage of cash buyers. focus on luxury end of the housing market. we think toll is insulated from a spike in rates. what's really driving this is tight inventory levels and lower interest rates and a stable pricing environment for the housing market. we think these factors will help toll and the rest of the sector moving into 2013. >> bob, bob toll mentioned this harvard study about household formation that needs to catch up because there was a lack of formati formation since 2007. how much does this help toll sales or is this a trickle up where household formation takes on lower end of the homes and that pushes buyers up? >> i'm not too concerned by the development or shift in the mix. the fact is household formation is going to accelerate and that's going to be a key driver
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of demand. i agree with bob toll's comments. we're definitely looking at much stronger demand. household formation is crucial to getting that demand and we think the demand is going to be very beneficial and will also lead to incremental job creation. >> negotiations continue on the fiscal cliff. obama appeared yesterday to raise prospect that some sort of modification on the deduction for interest payments could be put on the table. there are many people within the housing industry that go screaming around like headless chickens at the prospect of that. do you think it would have a huge impact if it came through? >> the biggest single risk that could derail the housing recovery. we're in the second or third innings out of nine. anything that flexes downward deductibility of interest expense for home mortgages is potentially catastrophic threat to the recovery. >> really? do you think that in the toll brothers space that whether or
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not people get a check for $10,000 is going to affect whether they purchase a house? >> what we're really talking about here, simon, is the incremental buyer on the margin. it's a question of do we have buyers? yes. are the number of buyers increasing? something which takes $10,000 out of your pocket will make you less likely to buy a house. it will have a negative impact. >> i don't understand. you say there's no impact from an increased in mortgage rates but the deduction will make a big difference. don't both impact that incremental buyer equally? i would think so over the lifetime of a loan. think of how much more you would pay in interest rates went up. >> that's a great point. in one sense higher interest rates means the economy is getting better. gdp growth is accelerating. that's a much more powerful tail wind than increase in interest rates. right now we're at low interest rates environment based on chairman bernanke's comments sounds like it will continue.
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we see the tax impact under obama's proposal as being a much greater and more severe risk than modestly higher jump in interest rates. overall we're still bullish. we're housing bulls. we see no reason based on the news from toll today to change that constructive view on the housing market. >> you mentioned in your note vertical development. anybody who lives in manhattan is starting to see a toll sign on a ten story condo building in mid town. is that a vanity play and material to quarters to come? >> urban infill is 20% of tolls ref few base. it's a long-term strategy. extremely high quality builder. they have expertise to go vertical in new york. it's a highly profitable segment. this is something which will continue to drive strong profit growth for toll brothers. >> interesting. not something you would think of immediately but something to watch. thanks for your time. >> thanks for having me. from homes to mobile phone makers and a bid to raise some
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much needed cash. nokia signed a deal to sell and lease back its headquarters in finland. the unprofitable handset maker sold its building for about $220 million. that brings us to this morning's squawk on the tweet. help nokia out. what are other ways nokia can raise cash? presumably other than sell more phones. tweet us. we have your responses throughout the morning. >> i have visited their headquarters. very beautiful. worries about the fiscal cliff are making people rich now. we'll explain why next. >> announcer: the holiday season is here and that means lots and lots of photos with a certain someone. now you can display it in style with a picture frame signed by the entire "squawk on the
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an hour into trading. 7:32 on the west coast, 10:32 on wall street. big lots up 8%. the retail chain expecting a bigger than expected quarterly loss and raising forecasts. adobe is up 24% so far this year and optimism surrounding the greek debt buyback helping to send the euro to seven-week highs. the number of companies that continue to announce special dividends in recent days continues to mount as they seek to avoid tax hikes that might kick in at the end of the year if the fiscal cliff is not dissolved away. >> more than 110 companies have announced special dividends in
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the fourth quarter. that's three times last year's fourth quarter. the reason? the fiscal cliff. if we go off the cliff, tax rates and dividends could more than triple or nearly triple from 15% to 43.4%. companies are racing to beat that tax hike by paying dividends before december 31st. arison is getting a potential tax savings up to $25 million. and larry ellison is getting savings of $56 million. tom frist will get more than $350 million from the company's dividend saving potential $100 million. and bain capital will get a piece of that and king of dividends is sheldon adelson. his tax savings on the dividend
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alone could be more than $340 million. all shareholders benefit from dividends and many of the ceos and owners recuse themselves from the dividend votes but these companies tend to have higher insider ownership. average inside ownership for dividend payers is around 27%. the average for the market as a whole around 7%. it all shows that if you can take next year's income today, you can also beat the tax man. simon? >> i mean, the question remains the degree to which you are harming the businesses by forcing cash out of them now. there are companies that are borrowing hundreds of millions of dollars. leveraging up the company in order to shoot that money out. that may be tax efficient in the short run. when interest rates rise further down the line or if the economy suffers, that may not be in the best interest of the business, robert. >> that's absolutely true. you put your finger on it. it's where the companies are borrowing to fund these dividends where we should look more closely. a lot of companies -- these are
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dividends scheduled for next year. they had the cash. they just accelerated them and there is an easier case to make. >> i think also it's worthwhile to point out that a lot of companies today are much less leveraged than they have been in the past and companies also have the cash and choose not to use that cash for repatriation reasons. >> some do and some don't. >> choice hotels is -- >> adding debt for debt laden balance sheet. it's about your ability to pay the cash back. capital markets have never been more open when it comes to fixed income at lower rates and that's a fixed income that they are paying. they know what they're going to be paying. >> the next question is how many insiders will actually start selling their stocks in order to pay less on capital gains. a filing on friday by the ceo of the nasdaq. he's adopting a stock offering plan to sell up to 1 million shares.
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this is interpreted as manically driven by tax reasons. that could be the next step of this. >> absolutely. i think the ceos are going to do less of that because of profile and publicity. shareholders as a whole and wealthy as whole are settling anything they can to take the gains now. why not? if you can manage that income forward to this year and accelerate that income at a lower tax rate, why not? this shows again that tax rates do matter. it does affect investor and ceo and company behavior. >> the risk of being repetitive, let me say that it willing an interesting end to the year when they go ex-dividend and if they borrowed, they pay it out and they plunge. that will be a tricky period. >> we should hold them to it and keep an eye on these companies especially. >> thank you for your time. with the slew of dividend hikes that we've been seeing, we want to explore which companies
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could be next in line. jay, great to speak with you. >> good morning. >> do you actually try to pinpoint which companies may be next and invest accordingly? >> we really don't. if you think of the strategy that we have which is good companies with good balance sheets and high returns, we have companies that, number one, have the ability to pay dividends and as we see now at this point in the year there are a number of companies that are overcapitalized and as you were talking about before strong management ownership, family ownership, that are doing the right thing and trying to maybe get ahead of the tax man and all shareholders benefit. if management pays themselves, we get paid too. >> are you concerned at all that should taxes on dividend gains go up next year that it will change the way investors perceive dividend stocks and maybe a dividend mutual fund like yours? >> i don't think so. i think the prospect of higher rates is probably well known by
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noun and it's baked in between that and prospect for increases in capital gains taxes we've seen the market be a little bit weaker since before the election so i think a lot of that has already been anticipated by the marketplace. >> you just repeated what we heard several times in the last few minutes. all shareholders benefit from the payout of these dividends which is true. that's what this network exists for. or investors. they're not the only people playing in the economy. let me ask you a question. if you take this cash out of companies, is that good for jobs and growth next year that the businesses that the engine of the economy has less oil in it. it has less cash. do you think that jobs poe continuati -- potentially could be cut. >> you have to look at the company. on one hand there are large companies going out and borrowing money at low rates which may be okay today but if things slow down that could be a little bit tricky.
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for us most of our companies that are paying special dividends tend to be overcapitalized and have cash on the balance sheets that is earning zero and has no impact on the underlying day-to-day business one way or the other. we've been urging companies in a zero interest rate environment to try and give some of that money back because that's actually capital that's been relatively unproductive. we would rather have them give it back to us so we can reinvest it in places where we think we can get a higher return. i don't think it's necessarily bad. >> jay, have you ever seen a period like this in your experience? >> i haven't seen one like this that was so tax driven. years and years ago i was in the junk bond business and you used to see financial engineering and leverage recaps where companies would borrow a lot of money and pay dividends. that happens a lot in private equity today. we haven't seen that in the public markets but in terms of tax driven activity like this in my career, i haven't seen it, no. >> you know that what we also
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haven't seen is repatriation from abroad. it may be returned to shareholders here but you don't have tax guys in big companies saying it's worthwhile to 1 trillion that they have offshore. they are not talking about bringing that back to the united states, are they? >> they are not because rates are punitive. we have companies where that is a big issue. they show really large cash balances on their balance sheets but most of it is overseas and bringing it back at a full tax rate wouldn't be great for shareholders right now. those companies are waiting and holding out to see if we get some bigger tax reform that would make u.s. corporate tax rates more competitive, allow some of that capital to come back and maybe be reinvest fsted given back but either way it's trapped and hopefully there will be resolution on that issue. >> we'll see. we haven't heard anything on that repatriation. we have a mover here with
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wireless broadband name. let's send it back to brian sullivan. >> you have done extensive reporting on this space. metro pcs shares are down because of a report out of reuters. people familiar with the situation are saying that sprint is unlikely to make a counterbid to buy metropcs. they agreed to be bought by deutsche telecom and according to the report there's concerns that if sprint were to also go after metropcs, it would complicate the regulatory review of its pending deal with softbank. the bottom line is if you are hoping for counterbid for metropcs, reuters says that's unlikely. david, i'm sure you have views on this. >> in fairness -- >> cnbc said it many times after the deal. >> just reporting why the stock is down today.
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>> it's interesting. its stock did move up. takeover premium in there. stock is down because of the reuters story re-reporting what we told people after that deal. >> they asked me to hit a name. i hit it. i agree. i wave the flag as much as i can. i promise. >> thanks, brian. brian sullivan back at hq. inc magazine naming its cop of the year. we'll talk to the ceo here at post 9 later on. >> and subaru making plans to expand in the u.s. we'll tell you how to play it with chief executive operating officer tom doll. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes
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for androgel 1.62%. what are you waiting for? this is big news. facebook making another move in the mobile space today and you don't need a profile page to take advantage of that. julia boorstin has details on that. >> good morning. facebook is opening its messaging app to millions if not billions of people that don't use facebook right now.
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messenger's new process requires a name and phone number. no other information necessary. emerging markets where people are less likely to have e-mail or computer access. facebook doesn't currently make money from messenger which includes free texting, group chat and photo sharing but the company hopes to use the mess answeringer a messenger app. >> people will be on facebook more as a result of this feature. over time what we're building right now is a large ecosystem and there are ways for us to kind of bring value to a lot of different parties in this ecosystems. >> facebook is praised for leveraging its mobile infrastructure saying it really focused on growing the business in a way that attracts new users and keeps existing users engaged. now, this is just the latest in facebook's many moves to make money on its growing mobile user base. it revamped its mobile apps and is rolling out mobile ads and it
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could easily include those ads with messenger. it's not available in the u.s. just yet. starting today anyone with a phone in venezuela, south africa, indonesia and australia and india will be able to me message for free. it's subject to data fees which are lower than text fees but facebook is working with carriers in india and indonesia to offer discounted and free access to facebook messenger data. simon, over to you. >> that could be quite big further down the line i imagine. up next on the program, the japanese operator subaru is looking to expand its presence in america after posting record november sales in the united states. how does the automaker plan to take on detroit's big three? the coo of subaru of america is here to give us his plan of attack next.
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one car company says think again. the japanese player subaru is doubling down on the u.s. market and expanding its presence right here in the united states. tom doll is the executive vice president and chief operating officer of subaru america. good morning. >> good morning, simon. how are you doing? >> i'm doing good. what is the announcement here? >> well, so far we're having a great year, up almost 30% for the year, the month of november. that's allowing us to expand our manufacturing capacity at our factory in atlanta. >> how many jobs? >> well, right now probably expanding closer to 2,500 to 2,800. later this year we'll make a decision whether or not we're going to bring out another one of our car lines from japan to produce at our factory in indiana. >> that sounds like a challenge to local politicians. what are you seeking for them to help you in that decision?
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>> we already have the fact in indiana so i'm not so sure. the biggest thing for us is making sure we get the appropriate air rights at the factory to make sure we can produce the number of cars that we can produce out there. >> you are the epitome of the japanese nate mare. this is for years what the japanese industry has warned about. if you don't control dollar/yen. if you don't keep the yen down relative to the dollar, we will lose jobs around the rest of the world. they wouldn't typically say to the united states but to lower cost producers. has the fed's ability to keep the dollar down influenced your decision or are you partly here because of q/e from the feds? >> there's no question about it. there's tremendous pressure on profitability. and that requires us then to rethink how we're manufacturing cars because if they're manufactured over in japan obviously we have to have the vessel costs and then we have the transportation costses versus if it's produced in the
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united states we have a lot less in terms of inland transportation out to our dealers and retailers. >> all the cars made in the u.s. be sold in the u.s. or will they be shipped overseas? >> probably a small quantity shipped overseas. most of what is produced here stays here and is sold here, yes. >> we see automakers add a shift, add a line. we've not seen a lot of capital construction, a new factory per se. are we getting closer to that moment or is that too far afield? >> for us, i think we're getting closer to it, closer to make that decision. i don't know if it would be more of an expansion of what we have currently in indiana. we have a huge ma silt out there over 500 acres of property we own and control so the ability to expand our capacity is there once we make the can decision to do so. >> what is the talk in the industry? do you think this is the beginning of a major trend? >> it depends on the manufacturers. i think when you look at what the bankruptcies that went through with general motors and
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chrysler, for a lot of capacity was taken out of the system and as a result there could be the potential for new capacity to be added in and, of course, it all depend on each individual manufacturer. each manufacturer is different. >> well, you mentioned some significant sales increases. how much of that is due to overall what we're seeing, sales increases throughout the auto industry and how much is subaru specific? >> the industry this year is up 15% so far to date. we're up about 30%. so as the industry -- >> why? >> because this year we had three new products we introduced. we introduced the brz which is an outstanding sporty car that we've got. and then about two months ago we introduced the cross track which is built off our impreza line. >> you're coming from a low base. >> that's true. >> correct me if i'm wrong, 2% of the market at the moment roughly. if we sell 50 million cars a year, you're at 300,000. >> this year at about 330,000, somewhere north of 330,000 when it's all said and done. >> any impact at all from sandy?
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given that you do have a significant presence in this it region. >> good question. we thought we lost about 1,000 sales last month when the hurricane occurred and obviously we're gaining that back this month and plus a little bit of outcome. >> are the gains because the sales have been pushed forward in a december or -- how much of that is replacement vehicles, vehicles that were destroyed in the hurricane? >> i think a lot of it is replacement vehicles, maybe a smaller amount was deferred demand. there's no question that the hurricane has had some impact particularly in the northeast, north jersey, long island, the areas impacted by sandy. >> do you take out promotions there? do you say this is where there's going to be a demand for new cars? do you get your skates on, this is a market opportunity? >> we're offering a small incentive to those folks impacted by sandy as our way of say i saying thank you for purchasing a subaru and also to help them to defray some of the other costs they've had to incur with
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losing home and property. >> good luck with the business, mr. doll. tom doll, chief operating officer for subaru america. game stop is revealing its game plan. opening 80 stores around the country as it tries to take advantage of the shopping season. will it work? find out when the ceo of gamestop joins us live after the break. cdw has solution experts for everything. they optimized our data center and got us on the cloud. they even sent tour champion, paula creamer, to help with charles' swing. maybe don't do that. that's not good. no! his job isn't to look good. it's to make the clients look good. oh my goodness! i can't help you. that's what i thought.
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we have helen zhu and 2013, could it be the year of the hedge fund recovery? another big hedge fund opportunity. brazil. a recently acquired expert. >> i do have -- it may not be appropriate for short-term trades. >> see you tonight. thank you, david. simon, see you at 11:30 for the european close. in the meantime, here is what you might have missed earlier on this morning. welcome to hour three of "squawk on the street." here is what's happening so far. >> i think that if this doesn't
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move forward, a solution starts to lay out a groundwork to solve the long-term issues, it could be disappointing even if it is fixed. >> if you want to come and risk your capital, there is no place in america that you have a better chance to have a return on the investment than in the state of texas. >> we would fire these guys where they are, when they're on vacation, but, no, they get to take vacation without finishing their pro jukts. >> who buys presents for your children? >> are you an american? >> yes. >> then why aren't you shopping? >> why should you take vacation without ledggislation? >> we shouldn't. we should stay here. we are trying to be reasonable and smart on this approach. we don't want to waste time. we don't want to go on vacation. we want to sit here and work and
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get the job done. >> draw management ownership, family ownership, doing the right thing and trying to maybe get a little bit ahead of the tax man and all shareholders benefit. management pays themselves, we get paid, too. >> we're checking our list as the "squawk on the street" countdown to christmas continues. ho-ho-ho. ♪ everybody is singing all the bells are ringing ♪ good tuesday morning. we're live here. get a check on the markets, the dow, treading some water here, up about 13 points or so. not a lot of data per se although a lot is coming on later in the week. s&p down two. nasdaq down 14. big lots seeing big gains after posting a smaller than expected loss for the third quarter and saying its ceo is resigning. steven fischman, ceo for almost eight years, says he wants to spend more time with his family and the company will look internally and externally for a replacement. darden restaurants down sharply after cutting profit fx for the
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year. the company is blaming failed promotions generated by its tests to limit health care costs for workers. to the road map this morning. president obama meeting with governors from around the country on capitol hill right now to discuss how to keep the economy growing. we'll talk to two former governors. jim gilmore of havevirginia, gr davis of california, about the states and what they need from the government and how states might be affected by the fiscal cliff. plus, gamestop revamping its shopping strategy. the new game plan and what it will mean for the bottom line. then a special dividend parade on wall street. while they're good for shareholders, those dividends might be even benter for company executives. just how much ceos are set to collect thanks to those divs. and ink magazine has named its top company of 2012. how the business rocked its way to the top. but we'll start in washington. the president meeting with six governors around the country to
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discuss the fiscal cliff. our be john harwood is live to talk about the impact of that meeting, john, and the impact of this offer that we got from the republicans yesterday. >> reporter: carl, we haven't heard from the president or the governors yet in this meeting. we did just get some remarks that gene sperling delivered in which he responds to boehner's letter calls the baoehner offer disappointing and says that an accept aps by republicans that rates have to go up is the key to unlocking a deficit reduction agreement. now that's consistent with everything that's happened at the white house since the election, essentially trying to break down republican resistance to raising top rates which is very popular with the american people. however, as i mentioned when we talked in the last hour, are the significance of the republican offer is that they have laid out and taken ownership of cuts to entitlement programs, medicare and social security, that would directly hit beneficiaries, the rising eligibility age, also the
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reduced inflation adjustments. that is a step forward in these negotiations because it represents them putting something specific that the white house will have to respond to. the president is doing an interview with bloomberg today. i would expect him to respond to those specifics and i think you see the beginning of the possibility where republicans, if they can agree either before december 31st in which case they'll be voting to raise the top rate or after january 31st in which they could only go down, the rates will go to 39.6%, between the changes in the rates and the entitlement changes, republicans may have to find part of the solution there. these are things the president was poised to agree to. they're going to deliver on revenue this time. the question is how. >> yeah, and on that point, john, i'm thinking back to the press conference that the president gave with reporters a couple of weeks ago. he was asked specifically if
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there is a deal that could happen without the actual rate going up. he did leave the door open. i wonder how much give there is on that one element of compromise. >> reporter: it's really how ambitious tax reform is possible and how quickly it is possible. it is not possible -- it is plainly not going to happen we will have a comprehensive reform by the end of the year. in the absence of that the administration is saying the only way you can guarantee sufficient revenue to make a deal is with the rates to rise. there are a lot of bipartisan groups that say yes. if you take the right approach to redoing the tax code, the question will be is that achievable or not? the white house judgment has been it is not achievable and that's why they're focused on the higher rates to get the money they need. >> all right.
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jim gilmore of virginia, form earp rnc chair, gray davis, the former democratic governor of ta california. gentlemen, good morning to you both. >> good morning. >> hello, carl. >> governor gilmore, you've talked about the rate element. is that a make or break for republicans or not? >> i don't know if it's a make or break in their negotiations or not, but it ought to be. the republicans absolutely should not sign on to tax increases or whether it's rates or otherwise. that's going to be a job killer for the next four years. we're not going to have growth in this country. you're not going to have more jobs. careers are going to be ruined. young people aren't going to be able to find work and then republicans should not sign on to that under any circumstances. there is, however, an approach that should be taken and that is this country ought to enact a growth plan right now. something that will spur growth in this kcountry, get investmen
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going and frankly raising rates on people is not going to do that. it will discourage jobs. that's something we can't do as a country. >> some live in california. my state taxes are already going up. by raising federal taxes you're just piling on. >> this election was about one thing, carl, are those people doing well off in life? willing to put our fiscal house in order and to create growth. the election was to get away from trust me economics meaning we'll work it out later and we're not going to tell you how to doing something concrete before we go off the cliff. every american's taxes will go up. unemployment goes up and bad
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things happen. at the very least we should take care of the middle class, people making less than $250,000. make sure their taxes go down. >> how much sway do they have in the room? they have a lot at stake knowing how much of their revenues come from federal grants. i mean, what can they say that will move either side of the table? >> if i were governor, meeting with the president today, i would say stop holding the middle class and the working people of the united states hostage to a tax increase program. and i disagree with my friend, gray davis. i think if you put taxes into this plan at all, you're going to reduce the economy. that's going to be bad for the middle class. bad for small business. bad for working people. >> so you're talking rates and revenue, right? >> if if you put together a groat program that grows the economy, revenue comes up automatically and that's what you have to do.
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if, on the other hand, you take more -- extract more money by tax increases through a fake compromise right now, you're going to decrease growth in the economy. right now that's not what the white house is proposing. >> governor davis, you heard john harwood a minute ago say that -- in his view he's encouraged by the fact that at least in this last offer the republicans did take ownership in his words of some entitlement cuts. you are exposing yourself to liability when it comes to constituents. is that a step forward? and do you think the white house needs to respond in kind now? >> the election was finding a different way to raise revenue, we can't afford to borrow 40 cents of every dollar. the dow would go down 2,000 points.
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we can't spend more than we take in. we have to grow the economy, cruiserweight jo create jobs and pay down the debt. >> you don't do it that way. >> but talk about the middle ground here. erskine bowles was asked whether or not he still endorsed the blueprint the speaker put together last night. he said circumstances have changed. it's up to negotiators to figure out where the middle ground is today suggesting that the election didn't move that somewhat. would you agree with that? >> the public has been set up for erskine bowles-type compromise from the very beginning. and erskine bowles, bowles-simpson increases taxes so it won't work. you've got to do something right now to actually put together an enactment of a plan to grow the economy. something that spurs investment, spurs growth and gets working people employed again.
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and that's what you've got to do. i respectfully disagree that the only democrats got elected in the past election. there was still a majority in the house of representatives republican that would return to office they ought not take ownership of something that will reduce jobs and growth. they ought not to do that or they'll be responsible for what happens in the next four years. let the democrats have their tax increases and you'll see what happens. >> as you speak, we have a fiscal cliff countdown clock right beneath you, 27 days and 12 hours. gentlemen, appreciate your time. thanks so much. >> thank you. governors gilmore and davis. let's get to brian sullivan with the market flash. brian? perhaps not happy here, carl, pby is falling today. they swupg to a third quarter loss. you can see the stock is down 13%, $6.8 million loss, basically 13 cents per adjusted share of a loss. wall street was expecting a
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prof profit. sales fell 2.4% quarter over quarter. of course the whole autoparts phase with a lot of action around this name, pby has been stuck in an $8 to $12 range for the better part of five years minus a drop in early 2009 when fiscal cliff hit. but here is the good news, carl. margins on tires rose for the first time. >> you probably have more tires at your house than i've owned. >> i bought some windshield wipers at pep boys. i'm not kidding. game stop tries to take advantage of the season. will it work? the ceo joins us live.
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the holiday season is here, and that means lots and lots of photos with a certain someone. now you can display it in style with a picture frame signed by the entire "squawk on the street" gang. if you can guess friday's nonfarm numbers, it's all yours. tweet with the #nail the number. you have to be at least 18 years of age to enter. sorry, kids. for all the official rules and details go to stockscnbc.com. good luck and say cheese.
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gamestop's holiday game plan is in full swing. the video game retailer completed opening about 80 of its pop-up stores in the hopes of nabbing some of the much desired holiday drivers. paul raines the ceo of gamestop. welcome back. >> great to be with you, carl. >> walk me through the holiday strategy. 80 pop-ups. >> what we learned, carl, is talking to our community, power of rewards members, there's a lot of game play intersecting with toys. we didn't see anyone serving that well. we decided to create a kids brand as a pop-up concept for the holiday. the hottest thing are for kids out there that's a toy and a game and we're serving those consumers pretty well. >> is this more or less adegreesive than last year?
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>> more aggressive. carl, what's happening we see ourselves taking shares in lots of different segments and the kids segment, things like sky landers, the lego toys, we see the opportunity for us to gain more and more shares. >> shares from whom? >> the existing toy players trying to integrate forward. some of the online players you'll see out there. >> we were chatting about the new wii-u controller. >> game changer, carl. i've spent about six hours last weekend on it and it's an innovative device. you think about it. it has a tethered tablet that you can play on a tablet and on a console so you can play all the traditional ip like super mario and my wife and i were playing donkey kong which i haven't played in years but high definition graphics games like call of duty. we think it's a real game changer. >> does it bother you when people say if gamestop doesn't find a different way they're
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destined to be the borders of tomorrow, the barnes and noble of tomorrow. >> thank you for not using the other one, carl. our team has been in transformation. we do hear that. less so if you notice the rise in shares as relates to people seeing this is really a cyclical business. we're going to do $600 million receipts and $150 million of mobile sales that didn't exist a few years ago. add to that an emerging console cycle and capital allegations plan that brought back $1 billion worth of shares. we think that those -- that old thinking is really disappearing on the gamestop. is there enough there to stand on? it. >> i think that the console cycle has been the longest in
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h history and i think our friends at sony and microsoft would agree with me on that. the fact nintendo has a product coming out is putting pressure on everyone. consumers are looking for innovation. they want to see innovative products. so at the same time tablets are becoming an important part of our business. phone gaming is an important part of business. >> finally, we were chatting about your former days as a home depot executive which is when i first met you years ago, you've transferred to this business, it's a little ironic that they are just now catching, finally, at long last, a tail wind in housing, right? >> absolutely. that cycle is great. a lot of good people there. what i've learned and what we tried to do with our team is dry a very high rate of internal change when you're in a critical cycle like we've been in. and i think i'm pleased already the change has been greater than that around us and that's why you see us versus other competitors and electronics having a position and a strategy for the future and 2013 looks great for us. >> and you play how many hours a
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week? >> my wife and i try to negotiate. i play about four hours a week. my son says, carl, how tough a business can it be that it's only video games? >> if only that were true. paul, thanks so much. paul raines, best of luck during the holidays. >> thank you very much. there's trouble in the world of small manufacturing. industry feeling the effects. we'll break down some of those numbers after a break. but before that, here are the governors who just met with the president speaking outside the white house. we're talking the governor of arkansas, scott walker, of course, behind her, of wisconsin. they make some comments that deserve some note. we'll get them to you after this break. the cnbc real-time egs change market snapshot is sponsored by interactive brokers.
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governor scott walker speaking outside the white house right now live discussing the meetings that these leaders of the national governors association just had with the white house, saying it's not -- they're not there to endorse any specific plan but they want to be part of the discussions. we'll monitor these for headlines and get them to you as soon as they are made available. new data shows that small manufacturers cut their investments in plants and equipment by 50% in the second quarter of this year. our phil lebeau is live to tell us why this is happening. phil? >> reporter: it's all about uncertainty, carl. this is a troubling statistic. i want to show you a chart we received which monitors 20 million small business loans with 17 million businesses around the country. look at the falloff here in terms of the amount of investment made by small manufacturers. what you want to look at is
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towards the end in the third quarter. it fell off dramatically. well, according to pay net, small manufacturers cut their investments in plant, in equipment by 50% in the second quarter. one of the troubling sectors transportation equipment, the investment there for those manufacturers fell off by 33% and according to the folks at pay net this comes down to manufacturers pulling back because of uncertainty. >> there was certainly a lot of uncertainty about how to implement affordable health care. how to react to the tax rates that were coming down pike, whether or not the deficit problem was going to be addressed. >> reporter: bottom line, uncertainty about the economy. we're seeing troubling sta t statistics. bottom line, carl, during the campaign you saw the white house, you saw republicans. they're always going after small manufacturers and saying we want to build manufacturing in this country. you know what? this statistic shows we're
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hearing everywhere. they're fed up with the stalemate in washington. they want resolution here. now they're not saying what resolution they want but they do want resolution. otherwise they're going to sit on the sidelines with their capital. >> you've got that rate and probably just the first signal of that happening in a bigger way if things don't happen the way they should. thanks, phil. phil lebeau in chicago. the bell will ring in europe in just a moment or two away, about three minutes. we'll get the close. details on the impact here in this country in a moment. can i help you?
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about 20 seconds to the close in europe. they've had some new economic data out of france, for instance. some finance ministers meeting as well in brussels. >> it's a bit of a holding pattern waiting for the fiscal cliff, for the greek debt buyback to go through on thursday. the european markets are closing now. >> so no great direction in the markets today. it is interesting, i think, both angela merkel attended today her party conference, the cdu, the christian democrats, conservatives, she launched her campaign to run germany for a third time. the election is in the third quarter of next year. she actually warned against premature optimism over the crisis saying the worst is not over and we must be cautious going forward. now to a certain extent she would say that, would she not? otherwise we're not out of the woods. keep me in charge.
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but that was the message that came out of germany today. elsewhere as we kind of wait for things to happen, it's interesting the bond markets continue to rally. we were talking about this yesterday that greece has priced the debt buyback where it has. it will be more generous and next week they're likely to get their money from the rest of the european union. taking some of those concerns back out of the market so, again, today the spanish bond market rallying and, therefore, the yield forming. still above 5% but falling. it's also true of italy. there the yields are down. take a look at where we are on the ten year, 4.4% and those bonds rise in value, you see the italian banks, for example, rising in value. the stock market, it's obvious the value of their assets is gaining ground. other financials around europe, the likes of kbc, bank of ireland, a lot of questions to
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the degree the irish can get better terms for their bailout or deal as a result of what the greeks have been given. there is -- and carl mentioned this, one area of concern today, and that's the finance minister's meeting where the frie french and the germans seem at odds over how they're going to get banking union, the germans are saying it cannot -- the individual banks cannot all be controlled by the ecb, the french saying, yes, they should be. that's the german finance minister. they are very split. they will try to hammer out a deal again middle of next weak. we're close now to the summit, the full heads of state summit. by then they should have a banking deal. what's interesting is with the backstop of the ecb we'll buy bonds if they ask for a bailout doesn't appear to be moving the market at this staining. >> euro above 130. >> and the ecb meets on thursday. that's really important. >> got the rate cut in australia overnight.
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thanks a lot, simon. a check on energy and commodities as well. golds had a heck of a day. sharon epperson is at the nymex. >> reporter: that's the story with gold prices reaching the 1700 level. the selling in gold, well, started overnight but it was really severe at the open of floor trading and we saw gold prices drop $25 or so. we're continuing to watch the selling here and there are a number of folks talking about macro funds having to redeem their long positions here as we have seen about an 8% rise in gold prices year to date. as we get to the end of the year, some of the book squaring going on. we're also seeing kind of what perhaps was telegraphed last week. we saw that significant options activity which put strikes around the 1695 level, 1700 level and that that seems to be the prices we're targeting here today in the futures action so that's what we're watching here in the gold market. we're looking at the etfs that are looking at record holdings
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so retail investors don't seem to be scared by the sell-off. they're still in the etf market. what's interesting to note is what's happened elsewhere in metals and copper has held up well here in light of the sell-off in gold. some folks say copper could be a big winner. back you to you. >> sharon, i know you'll stay on top of it. bob pisani is here. move in either direction here today? >> it's about even on advance/decline. a big inflow so gold individual investors, sharon is right, are investing. so why is gold down on the day the dollar is up and the trend is poor? i india is not doing particularly well on gold sales. china is okay. a lot of talk some institutional people might begin selling at this point because certainly retail investors in the u.s. are definitely buying the gold through the gld right now.
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the fiscal cliff very quickly here because the general consensus outlines of a deal out there. i know it doesn't sound that way. they're far apart. blah-blah. here is the idea. elements are emerging, folks, higher tax rates. nobody down here doesn't think there isn't going to be. if it's not 39% for the top 2%, it'll be 38%. some kind of compromise in the a area. the bad news and i've said this several times, the era of american austerity is beginning now and everybody is starting to realize that. the question is what's it going to look like? the good news is it's likely to be a gentle austerity, if i can say that, in 2013 and probably 2014 depending on the spending cuts. and there will be some cushion. the fed likely will continue its q/e program. they'll likely continue that during their meeting on december 12 that could provide some cushion against the austerity that we're going to be seeing in 2013 and 2014. let me comment on a couple of stocks that are moving today. toll brothers, folks, it doesn't
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get any better than this. 70% in orders. astounding. and their overall margin rates, 20%. those are fenphenomenal numbers. this is what happened in the last two. it was $15. this is a $30 stock right now. they're going to make $1 in 2013. this is trading for 30 times forward earnings. these are crazy multiples for home builders. they don't traditionally trade at these multiples and the pultes are in the 20s as well. that's the biggest problem to having these stocks move forward. it's just that people have already bought into the overall group. let me talk about the autoparts business. i don't normally talk about them a lot but look at the numbers, pep boys and autozone. pep boys had terrible numbers. their sales are really bad. tires weren't great. the do-it-yourself wasn't great. i would say part of the problem is pep boys, structural problems at pep boys individually.
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au autozone had numbers that were okay but sales seemed to be decelerating a little bit. i think overall the problem here, new car sales are getting better so the do-it-up self market is just not as strong as before. what's going on in the other industries here, we're about even on the advance/decline line. i think you're right. there's not a lot of movements individually between certain sectors right now. >> that could all change in a heartbeat. we know that. thanks, bob. companies doing business in china. some of the biggest laggards, the market flashback. >> reporter: it's not one story, carl, it is a couple of different stories here. let me start off with wynn resorts and casinos. you probably read the story about increased scrutiny about the macao based. they are noticing greater financial scrutiny around those casinos. that's knocking las vegas wynn
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and sands as well. another story came out really about a day and a half ago but is only now starting to get a lot of attention which is the s.e.c. beginning to look in a the china-based branches of the big four accounting firms here and suggesting there may be a hesitancy to produce certain documents. a lot of stuff going on around china right now. >> yeah, you have that rate. comments from dow chemical, as you said. goldman comments as well. thanks, brian. coach, dsw and american eagle a dividend payment ahead of the fiscal cliff. oracle said it was moving up three of its 2013 quarterly payments to this year. that's a nice payday for the ceo larry ellison who will take home about $199 million. the marketplace editor for "the wall street journal," alsos a new father. >> oh, thanks, carl. >> you look way too rested. >> i know. i hope my boy is not watching me, that he's asleep and being a
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good boy. >> let's talk some dividends -- congratulations. i'm so happy for you. let's talk some dividends. is this for the good of all shareholders or purely a personal decision? >> well, i have to say smoke them if you've got them. right now the market is saying give us our dividends. if you go to the website you'll see a list of dividends and the percentage of insider holdings for those companies that have produced those you see some companies you mention ed where there's not a lot of insider interest. of course there are companies like oracle. larry ellison owns about a quarter that have company where there is substantial personal dividends paid to insiders who run or own those firms. >> is it dangerous or not in some cases to finance this dividend? some have argued that already companies are maybe not leveraged enough. their balance sheets are not efficient enough, or is this truly a dangerous call? >> well, carl, you asked the perfect question. right now i would say there's probably not a danger.
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we see where financing rates are. you know where they are. money is cheap for corporations, well rated corporations. like i said, smoke them if you've got them. if you're alexander's, if you are dish network, westlake chemical, all these companies with significant insider ownership, they have all created special dividends. not all of them are borrowing to fund them. but i'd say right now probably -- and we need to pencil out the map together, carl, but the value of saving some tax hit potentially in 2013 is greater. >> what happens to these names after the payout, dennis? do they go back to their -- revert to their former sell was? >> isn't it funny? this was this big crush of dividends. now like baited breath keeping track of who is doing what.
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if anything companies that aren't issuing dividends will probably have a penalty in the marketplace in the next three to four weeks. but post that i would say january 1, all racers back to the starting blocks and they'll have to live up to their performance on a general actual stock appreciation basis and less a dividends. >> the guessing game has been fun. we had oracle on some screens a couple of weekends ago. there it popped last night. are there sure-fire, cannot miss special dividends you see coming in the next couple of weeks? >> i would love to see the real big industrial companies perhaps do some dividends, you know, could general electric do something? you probably think not given their recent history with some rollbacks. i think that's the next shoe to drop here, the real big companies. a lot are relatively small. >> right. >> the big ones are next. i have to say larry ellison meant that is a heck of a payday, $200 million in one check. it pays to own.
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>> that could buy a hawaiian island. he already has those. >> he does. >> dennis, get some rest. congratulations. >> i appreciate it. >> dennis berman. big banks set to outperform the broader market this year, how are will the group be affected by the fiscal cliff? how to play that. later on, mystery revealed. the ceo of "inc magazine's company of the year. how they are shaking up their industry after a break. twins. i didn't see them coming. i have obligations. cute obligations, but obligations. i need to rethink the core of my portfolio. what i really need is sleep. introducing the ishares core, building blocks for the heart of your portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal.
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coming up you'll hear from the street strategist who says s&p 1600 is just around the corner. weeks away now from the fiscal cliff. two insiders duel over a dael on that issue. and a big quarter for it toll brothers. should you buy into that stock? two traders, two very strong opinions. carl, we'll see you in about 15 minutes. turning our attention to the banks this morning, bank stocks are poised to outperform the broader market up about 16% this year. moynihan sat down with our own becky quick this morning. here is what he had to say about vac's dividend plan. >> let's talk about the broader conte context. we've been about simplifying our company. so at the high point about $2.6 trillion. at the low point in terms of
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equity ratios we had about $65 billion of tangible equity, now $140 billion. we've recapitalized the company. the ratios are among the leading in the industry on a worldwide basis. we're proud of what we've done. >> financials certainly in focus with the looming fiscal cliff. what will its impact be on the sector. the lead banking analyst for rbc capital markets and he joins us here this morning. welcome back. >> thank you, carl. >> first off, if we go over, all stocks are going to fall, right? >> that's correct. i would agree with you on that. >> on a relative basis, these guys might be a defensive sector? >> that's correct. it would be unique in all the years of me doing this, this is the first time we would look at the banks as a defensive sector if we go into a recession because traditionally, as you know in 2007, the bank stocks fell terribly during the recessi recession. normally you would not want to own them. this time we think it could be different. >> what would be defensive about it? >> if you look at the high risk loans that the industry has
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today, considerably lower than where they were in '07. for example, in 2007 you had high-risk loans to capital of about 200%. today it's 100%. much lower exposure to the risky areas. now you do break it down. there are some names you might consider. they're not the big boys, per se. >> correct. >> usb? >> right. >> pnc, bbt, wells -- >> correct. mmt, bankcorp, the high quality banks. we would say if you are worried about going over the fiscal cliff and a recession coming, these banks are very conservative and have always been so they should get hit the least. plus, what they have to remember, the banks are going through the street tests in march. the street test results are going to be very important because those tests are very difficult. banks will be raising dividends next year. as you heard just from brian moynihan. dividend are going up, buybacks are coming. in the middle of a recession, the banks will be doing pretty well.
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>> if if we do not go over the cliff, i guess your willingness to take on risk expands. you go with the citi, with jpmorgan? >> citigroup, jpmorgan, bank of america would be another. also some regionals, sun trust, regions financial. those banks will do very well. the toll brother numbers today, housing is very positive. >> some of the names like boa have had good years. since '91 it's had a year like this. doesn't that connote it may be petter than we think? >> the banks had a good year. an awful year last year as you know. valuations on price to book basis is attractive. and so to us they're trading as a group. we think eventually they get to 1 1/2 times book. that's the kind of upside. normalized earnings hopefully will materialize in 2014 and the
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upside for the banks is still very good. >> if we go over the cliff, is that mostly a loan growth issue? is it a net interest margin issue? what would hurt them the most? >> credit would stop improving and that's been a huge positive. the results showed today credit improved again. so i think credit would be the number one issue. it wouldn't continue to improve. second, you touched on it. the net interest margin. rates would even be lower and that will put pressure on the margins. >> if that's even possible. thank you. thank you for coming by. it is "inc. magazine's" company of the year. it's a can company you can really groove to. we'll unveil it when we talk to the ceo here in just a moment. , and the foundation on which merrill lynch has been built. today, our financial advisors lead from a new position of strength. together with bank of america, they have access to more resources than ever before.
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company of the year on the cover story of its december issue on newsstands today. zumba fitness is that company. a multifaceted brand and a big val value. 14 million weekly class participa participants across 150 countries. the ceo and co-founder of zumba fitness joins us this morning. congratulations. welcome. >> thank you.
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>> we were chatting about the origin of the company, the concept came out of columbia. but you discovered it, what, first in miami? >> yes. i was living in miami. i was in the middle of the dot-com bubble bursting and i had an internet company. i went to my parents' home for dinner and my mom kept talking about her dance fitness class which she was so happy about. she had been taking it for years and she said, why don't you meet with my instructor, maybe you can start a gym. i said i'll meet with him. i went to see his class and everybody was smiling. it was fitness without sacrifice. i said we need to scale this, to take it to the world. that's how it started. >> we went through the metrics to see how big you've gotten in a relatively short period of time. why does it work? what do they say works? >> i think one of the things that really captured inc. was the business model is a win for everyone.
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we didn't disrupt anything. we didn't take anything away from anybody. we made the consumer win because now the consumer is fit and feeling happier, the instructor win because they have a miss model and they're making money and changing lives. we made the gyms win because now they have all these new members of people who wouldn't otherwise walk into a gym and now they're taking dumb ba classes. the musicians win because now they have this platform to launch music to 14 million people. the charities win because we created zumba platform. we've raised $5 million the past three years and we win as a company because our business model is based on all these things working together. >> i don't need to tell you that the landscape of fitness is littered with concepts that came and went, right? >> yes. >> we could list them off here if we wanted to. how do you prevent joining that club? >> the thing about things that fall out of fashion or fads that go away, they only focus on a physical aspect. let's say the thighmaster. it works on the physical can
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aspect and there was something better that came out the year after. but there's something around for 5,000 years that is yoga and yoga focuses on the fitness aspect but also on the emotional benefits and on the social benefits and zumba is like yoga where it is a side benefit but the real importance is the emotion. it's the joy that people feel when they're doing it and it's the social aspect of people becoming friends and the connections. so we've been around for ten years and teaching the class for ten years before that. my mom has taken the same class tore 20 years and don't get bored. it changes every month. >> you've raised a lot of capital. one of the high-profile backers. interested in the capital markets and public markets? >> well, at this point we're focused on growing the business, on making it successful. the mission of the company is to help the instructors change more lives, to make them successful, to empower them to change more lives. so the only thing that affect them and help them so if that
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means doing an ipo, we do it only if it helps them. >> it's a great read. congratulations once again. >> thank you, carl. >> alberto perlman the co-founder and ceo. >> have you taken a class? >> i have not. we'll talk about that after the show. a quick programming note. the editor in chief of "inc." will appear on power lunch at 1:30 p.m. another company joining the special dividend parade, brian has that. brian? >> soup is good food. apparently paying out additional dividend. campbell's soup two real stories here, number one, the dividend that was going to be paid for the end of january will now be paid at the end of december, so they're moving up the regular quarterly dividend of 29 cents. they are also issuing a one-time special dividend of 29 cents as well, the same totals that will also be paid on december 28th. shareholders right around mid december so add another one to
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the list. >> thanks a lot. keep those tweets coming in the meantime. a bid to raise some cash, okia a deal to sell and lease back its headquarters in finland. what are some other ways they can raise money? tweet us and we'll get some of your answers after this break. americans are always ready to work hard for a better future.
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